The American Association of Acupuncturists is a professional association for acu
ID: 2612991 • Letter: T
Question
The American Association of Acupuncturists is a professional association for acupuncturists that has 10,300 members. The association operates from a central headquarters but has local chapters throughout North America. The association’s monthly journal, American Acupuncture, features recent developments in the field. The association also publishes special reports and books, and it sponsors courses that qualify members for the continuing professional education credit required by state certification boards. The association’s statement of revenues and expenses for the current year is presented below:
The board of directors of the association has requested that you construct a segmented income
statement that shows the financial contribution of each of the association’s four major programs— membership service, journal, books and reports, and continuing education. The following data have been gathered to aid you:
Membership dues are $75 per year, of which $15 covers a one-year subscription to the association’s journal. The other $60 pays for general membership services.
One-year subscriptions to American Acupuncture are sold to nonmembers and libraries at $21 per subscription. A total of 1,000 of these subscriptions were sold last year. In addition to subscriptions, the journal generated $53,000 in advertising revenues. The costs per journal subscription, for members as well as nonmembers, were $4 for printing and $1 for mailing.
A variety of technical reports and professional books were sold for a total of $78,000 during the year. Printing costs for these materials totaled $21,000, and mailing costs totaled $7,900.
The association offers a number of continuing education courses. The courses generated revenues of $237,000 last year.
The $113,000 in occupancy costs incurred last year includes $21,000 in rental cost for a portion of the warehouse used by the Membership Services program for storage purposes. The association has a flexible rental agreement that allows it to pay rent only on the warehouse space it uses.
Printing costs other than for journal subscriptions and for books and reports related to Continuing Education.
Distributions to local chapters are for general membership services.
General and administrative expenses include costs relating to overall administration of the association as a whole. The association’s central staff does some mailing of materials for general administrative purposes.
The expenses that can be traced or assigned to the central staff, as well as any other expenses that are not traceable to the programs, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.
Prepare a contribution format segmented income statement for the American Association of Acupuncturists for last year. This statement should show the segment margin for each program as well as results for the association as a whole. (Losses should be indicated by a minus sign.)
The American Association of Acupuncturists is a professional association for acupuncturists that has 10,300 members. The association operates from a central headquarters but has local chapters throughout North America. The association’s monthly journal, American Acupuncture, features recent developments in the field. The association also publishes special reports and books, and it sponsors courses that qualify members for the continuing professional education credit required by state certification boards. The association’s statement of revenues and expenses for the current year is presented below:
Explanation / Answer
Contribution format segmented income statement
(Amount in $)
Details
Membership Services
Journal
Books and Reports
Continuing Education
Total
Revenues
618,000
228,500
78,000
237,000
1,161,500
Variable costs associated with segments
423,600
121,700
74,100
122,200
741,600
Contribution Margin
194,400
106,800
3,900
122,200
419,900
Total costs attributable to central staff
168,400
Net Revenue
251,500
Breakup of segment-wise details as follows
Membership Services
Revenue
Total Members = 10300
Membership Dues = $ 60
Revenue from Membership = 10300 * 60 = 618,000
Variable costs
Distribution to Local chapters = 207,000
Salaries = 168,000
Rental Costs = 21,000
Occupancy (3000/10000)*(113000-21000)
= 27,600
Total = 423,600
Journal
Membership (10300*15 + 1000 * 21) = 154500+21000 = 175,500
Advertising Revenues = 53,000
Total = 228,500
Variable Costs
Printing ( 10300+1000)*4 = 45,200
Mailing (10300+1000)*1 = 11,300
Salaries = 56,000
Occupancy (1000/10000)*(113000-21000)
= 9,200
Total = 121,700
Books & Reports
Sales = 78,000
Variable Expenses
Printing = 21,000
Maling = 7,900
Salaries = 36,000
Occupancy (1000/10000)*(113000-21000)
= 9,200
Total = 74,100
Continuing Education
Fees = 237,000
Variable Costs
Printing (77000-45000-21000) = 10,800
Salaries = 43,000
Occupancy (2000/10000)*(113000-21000)
= 18,400
Instructor Costs = 50,000
Total = 122,200
Common Expenditure (Central Staff Expenditure)
Salaries = 113,000
Occupancy (3000/10000)*(113000-21000)
= 27,600
Mailing (22000-11300-7900) = 2,800
General & Adninistrative Expenses = 25,000
Total = 168,400
Details
Membership Services
Journal
Books and Reports
Continuing Education
Total
Revenues
618,000
228,500
78,000
237,000
1,161,500
Variable costs associated with segments
423,600
121,700
74,100
122,200
741,600
Contribution Margin
194,400
106,800
3,900
122,200
419,900
Total costs attributable to central staff
168,400
Net Revenue
251,500
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